With an investment of over $5 Bn in India, Prosus (previously Naspers) has said that it is focussing on the health of its portfolio businesses so that they can come out stronger from Covid-19 pandemic.
The company, in an analyst call, said that it has $4.6 Bn in net cash and can also raise debt if needed. “So we have actually a lot of capacity to do further M&A without raising further funds,” said Prosus CEO Bob van Dijk.
Prosus has channelled most of is investments into India as the market promises a huge consumer base. Its investments in the country include food delivery unicorn Swiggy and edtech unicorn BYJU’S. The company also owns online payments firm PayU and digital classifieds business OLX, which are also its “core areas” of further investments.
For Prosus, one of the potential areas of consolidation is food delivery. Globally, the company also currently holds stakes in Brazilian food delivery startup iFood and Germany’s Delivery Hero, among others.
Top executives of Prosus said they see food delivery as “recession-proof” but also competitors could struggle given the capital intensity. “I think you’ll see some of the weaker businesses globally struggle to survive in this new context,” said Larry Illg, who heads food delivery investments at Prosus.
PayU, which earns over half its revenue from India, saw a 50% fall in transactions after the lockdown in India but is starting to recover, the VC firm added.
“It is still too early to assess the full impact on the business in India. But, we are confident that PayU is well-positioned as e-commerce recommences online, thanks to the solid portfolio of very large (e-tailers),” said Dijk.
According to DataLabs by Inc42, the total capital raised by Indian startups in Q1 2020 stood at $4.1 Bn, which is 12% higher than the previous quarter. The $807 Mn investment in OYO along with other outlier funding rounds have increased the overall value of funding this quarter.
It is a fact that the Covid-19 pandemic, along with the lockdown which followed in India and other countries has had a devastating impact on the startup ecosystem. There have been numerous reports on employee layoffs, cutting down of startup valuations, investors pulling out of funding rounds and a slowdown in the overall business performance of startups.
Two primary reasons behind the flux in the ecosystem are uncertainty and panic. With the sudden turn in events, the operations of Indian startups are poised to witness a series of fundamental changes, but the question remains how fruitful will this be for the overall health of the Indian startup economy.